The Japanese Commercial Database Industry

Commercial databases continue to have a growing impact on business strategies by enabling efficient and easy access to all types of information. The information that can be found in some databases often is not available by other means -- or is accessible elsewhere only through the investment of considerable time and effort (such as spending hours leafing through stacks of iournals in a library). Another plus is that many online databases provide time-sensitive infermation hours or days before that same information is available in physical (paper) form. And most computerized databases oiier easy keyword searches, enabling the user to find relevant items that might be missed while searching through a lengthy paper edition. In today's fast-paced business environment, companies that can locate and quickly access critical information can gain a valuable competitive edge over their competitors.

Japanese companies, in general, have been slow in recognizing the value of database usage. ISur tyey are fast learners -- the number of packaged databases and online database services in Japan, and the rate of database usage, has been growing at a rapid pace. For Foreign companies with limited resources (or for individuals with special interests), finding out what databases are available, and gaining access to them, can be difficult. This is especially true here in Japan, where the added hurdle of the language barrier can make the difficulties seem insurmountable. DOn't think, though, that there is no useful information to be had, or that all the good information is in Japanese.

Currently, there are nearly 3,000 commercial databases accessible in Japan, either online or via a packaged medium such as CD-ROM or Boppy disk. Through the late 1980s and into 1991, the number of accessible databases in Japan was growing at a rate of 10% or more per year. THe growth rate fell to only 4% in 1992 (with the bursting of the bubble economy), however, and it remains low as companies watch their investments. Still, even though the rate is down, the growth continues

The majority of local databases in nearly two-thirds are still imports foreign-produced data bases distri buted by Japanese vendors. But about one-third are databases produced by Japanese companies, and the number is growing. And well over 100 of these Japan-specific databases are accessible iat least partially) in English. IFor u hrief description of selected English langtiage Japanese databases, see "Bilingual illld ENSrliShlunguagc Dutahascs in Japan " on page 36.--Ed.l

The Japanese database services market

Japan still lags behind the US and Europe in its use and development of databases, though there are indications that, as in other industries in the past, it is rapidly catching up. Japanese online business-oriented databases began to emerge only at the beginning of the 1970s; the first known Japanese database composec of corporate business data and stock prices was provided on magnetic tape in 1970 by the Nihon Keizai Shirnbun. Databases in science and technology -- such as those developed by the Japan Information Center of Science and Technology (JICST) and the Japan Patent Information Office (JAPIO) -- were not developed until the mid 1970s. If the progress in Japan is compared with that in the US (which it usually is), this was about a decade behind corresponding American efforts.

Part of the initial delay in developing Japanese databases was technology driven -- the lack of suitable hardware and software, and the difficulty of handling kanii -- but it was also partly driven by social and cultural mores. Chief among these has been a reluctance on the part of the Japanese to sell as a product (and more importantly, to pay for) something as intangible as information. Even today, there is an obvious reluctance on the part of many businesses to make public their "private" data, and an even more obvious attitude by both corporations and individuals that "we don't pay for information." Nor have Japanese copyright laws (or international coppright laws, for that matter) caught up with the realities of the computer era; thus the understandable attitude by many researchers and corporations that "the only way to protect our investment in getting this information is to hide it from prying eyes."

Attitudes are slowly changing, though. Few today question the growing importance of accessible information to Japan's future economic growth, and the government is actively promoting database development and usage. Japanese politicians are fond of styling Japan's future as an "advanced information society," and one often hears the 21st century being touted as "the coming information age." The role of databases is widely expected to become more important in the future as part of an information infrastructure for the strategic utilization of various types of essential data. Government database policies Cognizant of the fact that accessible and accurate information is becoming increasing crucial to continued growth of the national economy, the Japanese government has taken a special interest in promoting the production and use of databases. The government agency most active in database promotion has been the Ministry of International Trade and Industry. MITI has been making annual surveys of the trends of information supply and usage for the past decade, and it has developed a set of policies aimed at implementing measures to encourage the production of Japanese databases.

MITI has targeted four general types of databases as being of particular importance to the growth and development of the Japanese economy, and it is taking steps to promote the development of such databases. These four targeted areas cover (1) databases that will contribute to industrial growth and social development, (2) those that are of use to a wide range of industrial sectors, (3) those that are of international importance, and (4) essential databases that would be difficult for the private sector to develop withoLlt government assistance. MITI is also responding to foreign demand for information about lapan by attempting to "globalize" the databases produced in Japan. Efforts in this regard include promoting the construction of databases for overseas use and investigating how to establish an efficient system that will allow overseas users to easily access Japanese databases.

Other MITI activities include ongoing research on database develop ment, implementation of a comprehensive database directory system, and increased prc,duction of (and provision of public access to) government-owned databases. R/IITI also offers tax incentives for database producers and financial support for specified database production and operation.

MITI is promoting the establishment of regional databases through its New Media Community (NMC) Project. [See "Community Computing in Japan " in the August issue of Computing Jayan f(,v dPI in-depth look mt orze such project.--Ed.] Regional NMC centers are expected to serve as cornerstones of the infrastructure for Japan's future "advanced information society." MITI initiatives also include developing an infrastructure for database system interoperability, supplying assistance to small and medium-sized businesses (through the Small and Medium enterprise Information Research System; SMIRS), and making Unexamined Patent Gazettes available on CDKOMs.

While MITI is most prominent in database promotion, other government agencies are involved as well. The Ministry of Education, for example, actively promotes the organization and development of databases for scientific and educational uses. Its efforts include assistance with databases for national universities and educational research centers, and grants to academic researchers for rel evant scholarly research.

The Ministry of Posts and Telecommunications is active in trying to expand the size of the Japanese database market by promoting the construction of an improved data communications infrastructure. Meanwhile, the Agency of Science and Technology is offering funding for such goals as encouragement of interorganizational R&D; strengthening of the cooperation between industry, government, and academia; and joing international research.

The growing database market

In spite of technological and social restraints, the Japanese database industry enjoyed solid growth through the 1980s and the initial yeat-a of the 1990s. But the overall Japanese economy reached its peak early in 1991. Thereafter, when the effects of the so-called bursting of the economic bubble began to be felt, and Japan slid into an economic recession (from whrch it has yet to fully recover). Initially, the business slowdown was felt mainly within financial industries, such as securities, banking, and real estate; it soon spread throughout society as a whole, however. In 1992, profits plummeted in almost all industries, and the Japanese information services industry was no exception.

According to annual surveys conducted by MITI, the Japan database services market had sales of 189 billion in 1990 (which was about 3.2% of overall information services sector sales). In 1991, database services sales rose by 14%, to 216 billion. In 1992, however, the database market suffered a 1% drop, to 214 billion. Interestingly, though, sales for online services continued to increase (by 10%) in 1992, but sales of off line (packaged) media suffered a sharp decline (-26%)

Database services trends

The definition of "database services" includes database producers, database distributors, value-added network (VAN) vendors, information brokers, and agents. In Japan, the divisions between these categories are not cleanly defined, in part because the industry is still relatively immature.

A MTTI survey of the 222 database services companies registered in its Database Directory in autumn 1992 showed that 51% were producers, 46% were vendors, 28%, were infermation brokers, 8% were agencies, and 15% were "others." (Many companies were classified in two or more categories, with over one-third of the companies being both a producer and vendor.)

Only a relatively small number of Japanese database services companies are new corporations started specific31ly for that purpose; most entered the industry from one of a diverse range of industrial fields. In other words, for many companies, providing database services is only one of their business activities, and often not 3 major revenue source. The average for companies responding to the 19')2 MITI survey was a 23%, ratio of database sales to corporate gross sales (though profitability was growing; the overall average annual increase in database services revenues was about 25%).

As an overall trend, database services are becoming increasingly an important revenue source for man): companies. The percentage of companies responding to the MITI survey who said that database services were a "major business'' was 32%, in 1989. This increased sharply to 41% in 1991, with an additional 16% saying that they intended to develop their database services into a maior business in the future. The figures dropped, though, to 39% (and 10%, respectively) in MITI's 1992 survey, clearly showing that the economic recession was affecting the database industry. Signs are that the slowdown is reaching its end, however, and expectations are that databases will be an increasingly important source of revenues for information services providers.

Database production and distribution

Most publicly accessible databases in Japan (nearly 67%) are still of foreign origin, repackaged for the Japanese market. Information from domestic sources is simply not available in Japan to the extent that it is in the IIS, for example, nor is it distributed throughout the country in nearly as uniform a manner. That is not to suggest that "native" Japanese databases are not popular, however; while Japan-originated databases make up only 33% of the available databases in Japan, they in fact account for almost 86% of the total database sales volume.

Commerical databases can be classified as either online or offline. Online databases are those accessed on a real time basis via a communication line, such as from a remote computer via a modem and telephone line. Off line databases are packaged products that can be purchased on CD-ROM, floppy disk, magnetic tape, or other medium. In 1991, online databases accounted for sales of 149 billion while off line databases had sales of 67 billion.

Foreign-originated databases are predominantly available here online; for Japanese databases, packaged media still account for a significant percentage of sales. Estimates are that, on a revenue-generated basis, foreign database sales in Japan in 1992 were 88% online services, 4% tape or floppy disk, 4% CD-ROM, and 40/d "other or unspecified media." The breakdown for Japanese database sales was 60% online services, 13% tape or floppy disk, 9% CD-ROM, and 189'0 "other or unspecified media."

In terms of distribution, about 83 %, of Japanese producers distribute their own databases, 16% contract with another company to distribute their databases, and 22% contract with multiple companies. (The percentages don't equal 100% because some companies both distribute their own databases and outsource distribution.)

Of available Japanese databases, 69% are "factual" databases (original data), 23%, are "resource" databases (such as indices and abstracts), and 8% encompass both kinds of information. As Eric Rossieux notes in his "Managing the Information Gap" article (page 24), MITI classifies Japanese databases into four categories: business, general, science and technology, and humanities. Over the past few pears, the ratio of general databases has shown a steady increase, while the ratio of science and technology databases has remained relatively constant; the ratio of business databases has generally been falling. In "real" terms, though, the number within each category grew annually through 1991. In 1992, the number of accessible databases in Japan grew from 2,686 to 2,799, but the numbers of humanities and business databases fell slightly from 95 to 90, and from 1,062 to 1,059, respectively; the number of general databases increased from 721 to 763, and the number of science and technology databases grew from 795 to 816). These numbers are based on the MITI survey clara; according to the Database Promotion Center, Japan, in 1993 there were 4,175 available data bases in Japan, nearly 50%, more than the MITI count.

Some interesting trends are evident in the figures derived from the annual MITI Database Directory. The number of foreign economic databases has been falling sharply (from 127 in 1988 to 73 in 3992), for example, while the number of Japanese economic: databases has been rising from 31 to 89 in the same period). The number of energy databases has dropped significantly (from 34 in 1983 to 15 in 1992), as has the number of agricultural datahases (from 23 to 9). The greatest growth over this period was in the general database subcategory "newspapers, journals and news" (from 49 to 287).

That there is still much room for growth in the Japanese database industry is evitlent if the Japanese market is compared with that of the US. As of 1932, relative to the US, Japan had only 12% the number of participating organization, 10%, many database producers, 14% the number of registered passwords, 40% the number of actual available databases land 19% the number of domestic databases), and 180/0 of database sales. Even adjusted for the approximately 1:2 population ratio, Japan clearly remains well behind the US in every category.

Database use by Japanese firms

A majority of Japanese firms are now making use of databases. A recent survey of database usage in Japan found that commercial databases are being used by 71% of large enterprises, 55% of small and medium-size companies, and 67% of public organizations. (Usage of databases by small and medium-sized companies has fallen off in the past couple of years, as many recessionpressed companies try to cut costs. Interestingly, the use of inhouse databases (databases accessible only internally within a company or organization) closely parallels the use of commercial databases. In 1993, 69% of large enterprises and 67%, of public organizations used inhouse databases, compared with only 50% of small and medium-sized companies.) Among industry sectors, commercial database usage is greatest among firms in the petroleum and chemical industries (90%) and lowest among companies in the iron and steel (44%) and retail sales (42%) sectors. In terms of total amount spent by industrial category, the finance/insurance industry is by far the largest user of database services 583 million in 1992, over IO times the amount of any other business category).

Asked what type of Jnpanese commercial database services represent their major- source of information, 70% of business users said direct access to online databases, 20% access to online databases via a PC: network's such as Nifty-Serve were far and away the most popular network for this purpose), 4% tapes or disks, 3% CDROMs, and 3% "other." Amazingly, of those companies accessing online databases in 1993, only 6.5% were capable of doing so at speeds greater than 2400 bps. (This was up from 4.1'%, in 1992 and only 2.5% in 1991). Modems capable of 9600 bps or greater are just now gaining a foothold in the Japanese market several popular online databases and networks installed 9600 bps modems only within the past year, and 14.4K bps modems are still a rarity.

Overseas access

More and more Japanese databases are becoming accessible overseas, some in English, some only in Japanese. Among companies replying to the MITI survey, the percentage providing overseas access rose from 17'%, to 27% between 1989 and 1992, and another 31% said they have plans to enable overseas access. According to the Present State of Overseas Supply of Databases in Japan survey conducted by the Japan Database Industry Association (DINAA in summer 1993, the actual number of databases being supplied overseas (by 135 responding compa nies) was 306, an increase of 6';6 over the previous year. This is in sharp contrast to the 28 Japanese databases that were available overseas in 1987.

Databases suppliers cite several problems related to overseas supply. Topping the list in the 1993 DINA survey was the difficulty of setting up a sales network (59"/0 of those rep]ying). Other problems in the top five were high translation costs (56%), lack of awareness of demand (540/0), difficulties in establishing management systems (470/0), and copyright problems (30%).

A growing market

The database services industry in Japan enjoyed steady growth throughout the 1980s and into the 1990s. And, in spite of a slight slowdown beginning in 1992 resulting from Japan's economic recession, the database services industry looks ripe for further growth. In 1991, the MITI Survey of Selected Service Industries found that the market size of the Japanese database services industry was 216 billion. This was an increase of 14.5% over the previous year, and an impressive 350% growth over the period of a decade (61 billion in 1981).

Predictions are that the overall information services market will mushroom to some 20% of Japanese GNP by 2010, and the database services market will grow along with it. If your company is considering becoming a database producer or distributor, the market is out there, waiting for easily accessible, specialized information. And if you are an information consumer (and that includes all of us), there are numerous sources of data available, both online and packaged.